Record lamb prices tipped

A booming sheep industry, strong wool prices and slight growth in milk prices will be the main agricultural stories this year, according to Rural Bank’s 2018 Agriculture Outlook.

A booming sheep industry, strong wool prices and slight growth in milk prices will be the main agricultural stories this year, according to Rural Bank’s 2018 Agriculture Outlook.

Released last week, the report predicts that lamb prices will be particularly strong, with demand outpacing supply for the sixth consecutive year, leading to an expected record high price early in the year.

‘‘The exchange rate, seasonal conditions and slightly higher production in New Zealand will be factors to watch in 2018, but Ag Answers expects that 2018 will be another exceptional year for Australian sheep producers,’’ the report said.

Following record prices and strong exports last year, the wool market is expected to again remain strong with stockpiles low as Australian wool production continues on a 23-year-long period of decline.

‘‘The lagged and slow process of increasing the size of the flock and, therefore, wool production means that building supply will take time,’’ the report found.

‘‘Unusually for the wool supply chain, there appears to be very little wool stockpiled at any point of the chain, removing the buffer effect of stocks from the market.

‘‘Declining wool stocks in China have helped boost the Australian market, building on demand for woollen apparel associated with rising incomes.

‘‘The Australian dollar has been trending lower since September and some commentators suggest that it will fall further, which would add support to Australian wool prices.’’

In the dairy industry, while flat milk prices are expected in the first half of the year, a ‘‘more positive’’ outlook for 2018-19 prices is predicted.

India could play a big part in improving the sector, with a big order of skim milk powder expected from the country as it continues to eat into its stockpile.

‘‘India doesn’t import skim milk powder regularly, but when they do it is in large quantities,’’ the report said.

‘‘History tells us they could buy between 20000 to 35000 tonnes in the calendar year. This is something the dairy industry would welcome as it would reduce world skim milk powder stocks more quickly, bringing supply and demand closer to balancing.’’

Local wheat prices will continue to come under pressure, with the future of pulse crops uncertain, given the recent tariffs and discussions occurring in India.

‘‘At this stage, at a global level, it appears that the supply of most crops will at least meet demand, keeping prices under pressure in 2018,’’ the report said.